If you consider the front end of innovation to be where the great ideas come from and bringing those ideas to life within the organization, the back end of innovation turns the best of those ideas into revenue and margin through execution and speed to market.
Here's how the experts approach the job.
Most companies don't have a problem in coming up with enough good ideas. Their challenge is executing the right ideas quickly in order to generate revenue. To explore how a cross-section of companies handles this "back end" of innovation, Frost & Sullivan's recent Growth, Innovation and Leadership 2013 event shared insights from five experts representing mature blue chip firms and Silicon Valley start-ups. The panel was moderated by Pcubed's General Manager for North America, Dermot Brannock.
Balancing the Entrenched with the New
Key Insights on Innovation Execution
- Set time aside to innovate. It's not just for Google; Woodward and blinx both give employees designated time each month to explore new ideas.
- Encourage teaming up to deliver ideas. Idea originators may not be the best ones to communicate and sell the value of a new idea. Provide shared incentives to encourage bringing the best ideas to market.
- Don't ignore process and change management. These issues are some of the biggest challenges to driving new ideas to market quickly.
- Disruptive innovations are happening faster and faster. Speed of executing is becoming increasingly important. This translates into two ways to get to market faster: including disruptive companies in your portfolio of investments and potentially acquiring them and/or streamlining internal organizational processes and creating greater focus to drive ideas to market quickly.
By necessity, large and entrenched companies manage innovation differently from small start-ups. That also includes figuring out how to prevent overlooking the great idea because the potential revenue can't compete against the core business.
The challenge is a real one. Julian Gay, former senior product manager for European mobile network operator Orange, said the company purposefully runs an R&D team in San Francisco - "way outside the sphere of the mothership" - specifically to research innovations "on the edge." That was its mandate from the "highest levels" of the company.
"When we articulated an opportunity, we wouldn't do it as a whitepaper," Gay said. "We'd build a prototype with engineering capability or partner with a startup, because obviously timing and time to market is key to tech-based opportunities."
But those discoveries wouldn't always generate the excitement they probably should have within the corporate entity because they wouldn't look noteworthy to begin with. "We'd be seeing disruptive behaviors emerging, and we'd be trying to persuade business stakeholders in Orange's core countries that it was significant; but they'd be looking at their existing revenue and saying, 'That's insignificant.'"
Recently, Gay and two colleagues left the company to launch a start-up that originated within Orange called Xen.do, an online service to enable users and enterprises to search across cloud-based sources of content. (Watch a future issue of Pcubed Insight for an in-depth interview with Gay.)
Woodward, a global company that makes system controls for engines, has several innovation initiatives in place to ensure that as new ideas bubble up, they get the attention needed to see whether they have real merit. According to Program Manager Kim Bitner, up until a couple of years ago, innovations were done based on "whoever screamed the loudest." Now Woodward has put in place a market-based scoring structure that tries to quantify the potential value of an innovation based on measurements taken from the market, the customer, and technical aspects.
Also, development groups at Woodward get eight hours a month to have what's called a "quality stand-down," in which participants can innovate continuous improvements, Bitner says. The value of that is that now "it's not just the screaming customers driving the market; it's what's coming from the teams as well."
Getting Senior Buy-in
Getting buy-in from senior management is a continual challenge for people with ideas. To make sure that innovators get the initial resources they need, panelists suggested a number of approaches. At Woodward instead of building a sizeable investment infrastructure to support development of innovations, the company has "carved out a bucket of money called 'Prototypes,'" says Bitner. The idea is to create "quick prototypes" that can be given to customers to try out. "As we do that, we're getting customers saying, 'This is solving my problems. I need this,'" she notes. The prototypes serve several purposes: They help prove the idea from an engineering standpoint; they're used as sales tools; and they generate "quantifiable numbers" that can be used to evaluate the value of the innovation within the organization.
Indranil Sircar, technology strategist for Microsoft, says getting buy-in presents a "typical" risk dilemma. Management must decide whether to take a profitable business and bring something new into it or take money out of a profitable business and put it somewhere else.
Microsoft has evolved an innovation management framework over many years that allows the many thousands of ideas put forward by people to be filtered through a structured process that at each stage examines some aspect of its viability such as alignment with strategy and business justification. If that filtering process isn't in place," Sircar says, "management will never have the confidence that what we have come up with - from a solution perspective - actually has the value." (Read more about Microsoft's innovation management framework in this Pcubed article featuring Simon Floyd, Director of Innovation and Product Lifecycle Management at Microsoft.)
Building an Innovation Team
Oftentimes the people who come up with the idea aren't necessarily the best ones to pitch it to decision-makers.
Suranga Chandratillake, president and chief strategy officer for blinkx, a London - and San Francisco-based video search and delivery service, says his company places the responsibility and accountability with the individual. "We tell people, 'Whoever you are, wherever you work in the company, you're allowed to have innovative ideas. It is then your responsibility to get that the attention it needs from management in order to get the resources it needs to turn it into something bigger."
But blinkx doesn't stop there. It has set up an environment that encourages other people in the company to participate in that process. "You might have a really smart person with a really good idea [who's] incapable of presenting that in a way that makes sense to anyone," notes Chandratillake. It's up to that original person to find somebody who's better at communication and persuade him or her to support the idea and work on it as well. So the company provides every employee with a portion of time where they can "do things off the books and try out new ideas."
Second, people can apply for a "small amount of funding" to build and test a prototype. Since blinkx is a software-oriented company and software can be "cheap to build," the main use for those funds is to do marketing, which generates data that will allow the person to make a more structured case for additional funding.
Third, the company has structured an incentive program that, when an idea pays off, rewards the person who came up with the idea as well as those who helped bring it to fruition. "If you get right people for the team and it pays off, then it pays off for all of you," Chandratillake says.
Getting end users - the "customers" - really engaged in ideas can take many forms. At Microsoft, the traditional methods, such as customer surveys that generate feedback on product usage, are still favored. But more frequently, says Sircar, he's seeing the use of the new channels of social media to understand better how users perceive what Microsoft is doing. "That large volume of data actually helps product development quite a lot, not only in terms of improvements but also in terms of possible new directions for their usage."
blinkx uses the same approach. "We're not asking [customers] what they think; we're looking at what they do," explains Chandratillake. "They tell us all kinds of things when we look at what they're clicking on or doing. That's very quantitative."
Ultimately, Innovation Management Is...
When blinkx started out, it was an "enthusiastic disrupter," states Chandratillake. Now, he says, "I've gone through a fascinating conversion." He's become the business owner "who's afraid of being disrupted." While the prospect of being overtaken by the latest new, new thing sometimes makes him want to "hide and hope that it will go away," he also recognizes that at the heart of both of those modes is innovation. To help his company stay ahead, he does whatever he can keep it "sharp and knowing where to drive bets and drive those bets very, very fast."
Woodward and Microsoft both follow the philosophy that innovation is "everybody's business." While it may be habit to look to research and development for the next new product or service, says Bitner, her company is also finding "pockets of innovation in the supply chain, insourcing, outsourcing, enterprise-wide."
Adds Sircar, the rise of the "new millennials" and how they work with the network and their devices is also changing the kinds of innovation that are surfacing now on Microsoft's landscape. But even potential new products or services serving that new gen market or deriving from it must go through the structured approach the company follows in vetting ideas.
Xen.do's Gay observes that "disruptive innovations are happening faster and faster. Social networks and the smartphone didn't exist six years ago." The challenge large companies face is figuring out the right mix for their portfolios to make sure they stay connected to customer trends and bring the right products to market. That mix will probably turn out to be doing "traditional R&D, partnering, and having a stake in disruptive companies and potentially acquiring them."
Pcubed's Brannock points out that although there are a lot of "great ideas out there," if they can't be commercialized, "they're not much good to anyone." Companies are showing that they have a new and growing appetite for innovation, he says. That capacity for taking ideas and turning them into something that generates revenue and margin makes the "back end" of innovation all the more important, because that's where the execution must deliver on the promise.